LETTER TO THE EDITOR: Suggested corrections

Raleigh, N.C.

Jan. 21, 20224

TO THE EDITOR:

I read your editorial piece today on the recent rate increase request proposed by the North Carolina Rate Bureau and the NC Insurance Commissioner's potential response. As the COO of the Rate Bureau, I have certainly read a lot of articles and editorials on this subject over the last few weeks. I have to say, that your editorial is one of the more fair and balanced pieces is have read. I appreciate you putting in some research time to understand the process and more accurately inform your readers. I would like to offer a few corrections to statements that were made in the editorial.

1. You are correct that the Commissioner has the option to either accept or deny the rate request, but the hearing does not come within 50 days of that decision. The 50 day statutory window is where the Commissioner must either accept or deny the rate request. The Commissioner then sets a date for the official hearing, which may be as much as 6 months or more into the future. The last homeowners filing presented in 2020 was outstanding for almost a year before finally being settled in 2021 prior to reaching the scheduled hearing date.

2. This one is more of an omission than a correction. You correctly described "Consent to Rate" as a tool that insurance companies may use to go above the rate approved by the Commissioner on individual property risks that warrant a higher premium.

However, you failed to mention that the NCJUA/NCIUA (state "wind pool") cannot use "Consent to Rate" on their policies. Unfortunately, NCJUA/NCIUA is likely where many of your readers have placed coverage for wind damage on their home as most homeowners' insurance companies exclude wind coverage from their policies in beach and coastal areas.

This means that according to the data submitted to the Commissioner, the state wind pool's rate could be drastically insufficient on coastal properties. By statute, in the event of a catastrophic claim where the NCJUA/NCIUA does not have enough to cover the claims, any insurance company writing property coverage in the state may be assessed to cover the difference.

This is a large concern for the insurance industry and a likely contributor to the fact that we are already seeing some large property insurance carriers pull back from writing business in North Carolina.

So while the carriers do have the ability to charge actuarially sound rates on individual homeowners policies through "Consent to Rate," insufficient rates in coastal territories can still impact availability of a healthy market for all North Carolinians.

3. You stated that, "most of the damages experienced in recent hurricanes have been inland of the coastal regions" as a justification for shifting some of the rate need away from the coastal territories. While that statement may be true, much of that damage in the inland territories was a result of flooding and therefore not covered under the Homeowners policy form used in North Carolina. Flood coverage is typically excluded from property policies across the country and must be purchased separately. Any damage that resulted from flooding would not be included in the data used to complete this homeowners filing.

Our data shows that claims paid from large storms is concentrated more in the coastal areas as a result of the wind damage and this is reflected in the rate requests for those territories.

Thank you again for keeping your readers informed on this subject. Please feel free to reach out if you have any additional questions.

JARRED CHAPPEL